This Tax Alert summarizes a decision of Jaipur Tribunal (Tribunal) in case of Prakash Chandra Mishra [1] (Taxpayer) wherein the issue before Tribunal was on applicability of advertisement equalization levy (Ad EL) and corresponding expense disallowance on non-deduction of Ad EL at the time of payment.
The Taxpayer, an Indian resident individual and a business constituent of Google Asia Pacific Pte. Ltd., Singapore (Google), had access to Google’s advertisement program. He granted access of such Google program to its clients {non-resident (NR) advertisers} using which the NR advertisers ran advertisements targeting audience outside India. The Taxpayer collected ad fees from NR advertisers and remitted to Google and claimed expense deduction of such payments.
Having regard to the facts of the case and, particularly, the factual finding and legal conclusion of the first appellate authority (FAA), the Tribunal accepted that the Taxpayer acted as an agent/conduit between Google and NR advertisers. Basis that, the Tribunal concluded that the Taxpayer merely helped NR advertisers to avail services of Google program and, as an intermediary, was channelizing funds from NR advertisers to Google. The ultimate beneficiary of advertisement services were NR advertisers who have no business in India and their advertisements were also targeted to audience outside India.
In such a case, where advertisers are NRs and target audience are also outside India and Taxpayer is merely making payment to Google on behalf of such NR advertisers, Ad EL provisions are not triggered. Accordingly, the disallowance of expense in hands of Taxpayer was deleted.
